Alberta says it can’t afford public pensions. Then who can?
Alberta says it can’t afford public pensions. Then who can? | National Post
Canadian governments — slowly, awkwardly and in the usual piecemeal manner — are gradually beginning to address the financial elephant in their shared room, the problem of unaffordable public pensions.
The Alberta government made what appears to be a serious step in that direction Monday when it announced a proposal for big changes to the pension plan covering about 200,000 active employees. The Finance Minister, Doug Horner, emphasized the changes would not impact existing retirees, who would not see any changes or clawbacks. But he spoke in the words familiar to government ministers across the country as they try to convince public employees that changes are inevitable as the benefits of the past become unaffordable.
“We recognize that there’s no crisis today, but it’s the long-term sustainability that we need to address in these plans,” Horner said. “We’re making sure that those public-service employees that are in the system today, their pensions are secured. There is no sky is falling here.”
The Alberta proposal would freeze benefit increases until 2021; reduce the rate of cost-of-living increases and set “targets” instead of guarantees; cancel early retirement incentives and reduce benefits for those who retire early; and allow the government to escape automatic improvements during tough times.
Predictably, Alberta’s labour organizations are having a conniption. The unions representing provincial employees are so upset about the plan they scheduled a press conference to respond to the plan for Sunday, 24 hours before the details were even unveiled.
They don’t need details to know what they hate, and any threat to pension plans falls well within that category. Gil McGowan, president of the Alberta Federation of Labour, blamed it all on a campaign by “right-wing lobby groups and corporations seeking to reduce the pay of their own employees and exploit what we describe as the politics of envy.”
That was to be expected, but the outraged cries of labour bosses are running up against a wall of unassailable financial figures, which have grown so compelling they’re forcing the hands of politicians who would otherwise prefer to avoid an ugly public confrontation.
Alberta’s pension has unfunded liabilities of $7.4 billion which, while affordable now, won’t be as the ranks of retirees grows and people collect benefits over longer lives. The number of active workers to retirees has already shrunk dramatically, so fewer people are paying more money to support retirees over a longer period. There’s a limit to how often pension plans can boost payments by active workers or ask taxpayers to foot a larger government contribution, and the market struggles of the past decade demonstrated how uncertain investment growth can be.
Alberta isn’t alone in facing the music. In May, New Brunswick Premier David Alward announced a revamped plan that would increase the retirement age by five years over a 40-year period, base payments on an “enhanced career average” rather than the traditional best-years’ salary, and link cost-of-living increases to the plan’s performance.
“It is not fair or realistic to expect New Brunswick taxpayers to backstop huge swings in pension valuations because of the performance of pension plan investments,” Alward said at the time.
Despite what the unions claim, it’s not a case of governments against their workers. It’s Canadian taxpayers who can no longer afford the bill for richer plans than most of them enjoy. The world has changed since those plans were approved. The numbers are compelling. Like it or not, politicians are being forced to admit as much.
Alberta says it can’t afford public pensions. Then who can? | National Post
Canadian governments — slowly, awkwardly and in the usual piecemeal manner — are gradually beginning to address the financial elephant in their shared room, the problem of unaffordable public pensions.
The Alberta government made what appears to be a serious step in that direction Monday when it announced a proposal for big changes to the pension plan covering about 200,000 active employees. The Finance Minister, Doug Horner, emphasized the changes would not impact existing retirees, who would not see any changes or clawbacks. But he spoke in the words familiar to government ministers across the country as they try to convince public employees that changes are inevitable as the benefits of the past become unaffordable.
“We recognize that there’s no crisis today, but it’s the long-term sustainability that we need to address in these plans,” Horner said. “We’re making sure that those public-service employees that are in the system today, their pensions are secured. There is no sky is falling here.”
The Alberta proposal would freeze benefit increases until 2021; reduce the rate of cost-of-living increases and set “targets” instead of guarantees; cancel early retirement incentives and reduce benefits for those who retire early; and allow the government to escape automatic improvements during tough times.
Predictably, Alberta’s labour organizations are having a conniption. The unions representing provincial employees are so upset about the plan they scheduled a press conference to respond to the plan for Sunday, 24 hours before the details were even unveiled.
They don’t need details to know what they hate, and any threat to pension plans falls well within that category. Gil McGowan, president of the Alberta Federation of Labour, blamed it all on a campaign by “right-wing lobby groups and corporations seeking to reduce the pay of their own employees and exploit what we describe as the politics of envy.”
That was to be expected, but the outraged cries of labour bosses are running up against a wall of unassailable financial figures, which have grown so compelling they’re forcing the hands of politicians who would otherwise prefer to avoid an ugly public confrontation.
Alberta’s pension has unfunded liabilities of $7.4 billion which, while affordable now, won’t be as the ranks of retirees grows and people collect benefits over longer lives. The number of active workers to retirees has already shrunk dramatically, so fewer people are paying more money to support retirees over a longer period. There’s a limit to how often pension plans can boost payments by active workers or ask taxpayers to foot a larger government contribution, and the market struggles of the past decade demonstrated how uncertain investment growth can be.
Alberta isn’t alone in facing the music. In May, New Brunswick Premier David Alward announced a revamped plan that would increase the retirement age by five years over a 40-year period, base payments on an “enhanced career average” rather than the traditional best-years’ salary, and link cost-of-living increases to the plan’s performance.
“It is not fair or realistic to expect New Brunswick taxpayers to backstop huge swings in pension valuations because of the performance of pension plan investments,” Alward said at the time.
Despite what the unions claim, it’s not a case of governments against their workers. It’s Canadian taxpayers who can no longer afford the bill for richer plans than most of them enjoy. The world has changed since those plans were approved. The numbers are compelling. Like it or not, politicians are being forced to admit as much.
